Tuesday, March 26, 2013

What did Yahoo Buy? Problems and Opportunities in Learning from Others

Wall Street Journal reports that Nick D'Aloisio, who is 17
years old, has sold his company to Yahoo Inc. for an undisclosed price that is
rumored to be above 10 million dollar. Nick D'Aloisio started work on the
free newsreader app Summly when he was 15, and it became a successful tool to
quickly read news summaries. Yahoo has now closed down Summly. Puzzling, you
might say, because Yahoo might have continued to operate it instead. So did
they just buy a competitor in order to kill it? Are they taking a pause in
order to re-launch it?

What we have heard so far is different, and interesting. Yahoo will be using the Summly technology in other products. Nick
D'Aloisio also plans to work for Yahoo for a while. So the purpose of the
acquisition is to transfer existing (and very novel) technology to work groups
that make and maintain a variety of Yahoo products, and continue to
benefit from Nick D'Aloisio's innovations for as long as he works for Yahoo.

OK, but will this work? How good are companies at transferring technologies
internally? There is a lot of debate on this issue, and much of it has been on
the barriers against such transfer. NIH means “Not Invented Here” and refers to
how firms and work groups can be very slow in accepting superior ways of doing
things, if they were made by others. Unsuccessful transfer is also common, with
firms trying to transfer technologies but not understanding them well enough to
get the same performance everywhere. The “copy exact” rule,
supposedly from Intel, is a way to try to get the same performance in each
transfer by copying not just what engineers think is the essence of the technology,
but also a host of superficial features that might actually have some unknown
effect.

Now Henrik Bresman has published an article in Academy of Management Journal suggesting that internal transfer processes are richer than people
have imagined, and that we may have underestimated how frequent and beneficial
it is. His point is that we usually see a transfer as occurring when one
technology or practice is moved from one place to another, and produces a similar
(good) result there. That's too simple. An important step in transferring is
translation: the work group who receives the practice has to understand it,
with the help of the unit that gives it, and often the translation step means
that both groups come to understand the practice more generally. The receiving unit
can then do something different than the original practice, but based on it,
and will benefit from that. If we look narrowly at technology transfer, no
transfer has happened. In fact, transfer has happened. That transfer may even help
the giving unit understand the practice better and use it better next time
around. What is transferred can be the actual technology, it can be a
modification of the technology, it can be knowledge on when not to use the
technology, or it can be the principles behind the technology. What are the chances
that some of the research reporting NIH effects has missed these transfers? I
would guess they are high.

How relevant is this research to Yahoo? It should be very
relevant because Henrik Bresman studied in-licensing work groups in a pharmaceutical
firm, and they transfer technology in a very similar way as the
technology transfer that Yahoo is now preparing for. If I were a Yahoo manager
I would look closely at Bresman’s article. I am guessing that Yahoo is already
expecting to learn from the Summly technology in multiple ways, not just by copying exact. The acquisition
price will be justified if they manage that.